Can You Still Take the First-Time Homebuyer Credit?

One key aspect of Part III is figuring out whether you made a gain or loss from selling or disposing of your home. You enter the total amount you received from the sale or any condemnation award, subtract your related selling expenses, and determine your net gain or loss. If you sold to a related party, you do not complete this section as it does not create a gain for repayment purposes. If you're in Year 15 of your repayment schedule, you might only owe a small amount.

Determining Your Repayment Obligation

In divorce settlements, the obligation transfers to the recipient spouse. Understanding these scenarios helps avoid unexpected liabilities. It is necessary for you to file Form 5405 if you claimed the First-Time Homebuyer Credit in 2008 and, in 2023, you sold, disposed of, or your home was condemned or destroyed.

This form helps you report repayment of any remaining credit balance or explain why repayment isn’t required. If you are simply making annual installment payments without selling or disposing of the home, you do not need to file Form 5405; instead, you report payments on Form 1040, Schedule 2. Taxpayers with earned income greater than $200,000 for single or $250,000 for married filing jointly will also pay a higher Medicare payroll tax. Beginning in 2010, buyers of new vehicles no longer get a tax benefit for sales tax paid on new vehicles, unless they itemize and elect to deduct sales taxes instead of state income taxes. If the credit exceeds the filer’s tax liability, all or part of the credit will be refunded if the filer earns more than $3,000 in 2010, down from $12,550 in earnings previously. If you purchased and closed on a primary residence before September 30, 2010, and are a “first-time” homebuyer, you can qualify for a tax credit of 10% of the purchase price up to $8,000.

The amount of the credit was the lesser of either a fixed percentage of the home's purchase price or a fixed dollar value. As you can see, there’s not much you can do to get out of repaying the tax credit. The best thing you can do is just make sure you’re making the payments every tax season until the full amount is repaid. The First-Time Homebuyer credit was an incentive by Congress to boost housing sales in a time when the Great Recession made it difficult to purchase a home.

Investments in a certified Virginia real estate investment trust made between January 1, 2019 and December 31, 2024 may be eligible for an income tax subtraction. You may subtract any income attributable to a first-time home buyer savings account if you meet certain criteria. Homeowners will want to stay aware of repaying the 2008 first the latest developments to know if they’ll be able to claim this significant deduction for 2015 and beyond. This deduction can include expenses like mortgage interest, insurance, utilities, and repairs, and is calculated based on “the percentage of your home devoted to your business activities,” according to the IRS.

• You enter the total amount you received from the sale or any condemnation award, subtract your related selling expenses, and determine your net gain or loss.
• Explore how to REDUCE, RESOLVE, or even ELIMINATE your back taxes through the IRS Fresh Start Program.
• You are allowed the full amount of the credit if your modified adjusted gross income (MAGI) is $75,000 or less ($150,000 or less if married filing jointly).
• When the credit existed, it phased out at modified adjusted gross income levels between $75,000 and $95,000 if filing single, or $150,000 to $170,000 if you filed as a married couple.
• While it’s harder to get out of paying back the tax credit altogether, there is a way that you might only have to repay a portion.

Are Face Masks Tax Deductible?

• This deduction can include expenses like mortgage interest, insurance, utilities, and repairs, and is calculated based on “the percentage of your home devoted to your business activities,” according to the IRS.
• The credit is eliminated completely when your MAGI reaches $95,000 ($170,000 if married filing jointly).
• At the time, this credit offered up to $7,500 as an interest-free loan – with the catch that it had to be repaid in equal installments over 15 years, starting in 2010.
• Repayment requirement for homes purchased after 2008 has expired, though you'd still need to repay the credit you received for a home purchased in 2008.

The repayment on the tax credit is supposed to be interest-free, according to IRS documentation. There are limited circumstances where you would owe the balance of the credit on your tax return if you sold the home and it was no longer your primary residence, for example. If you can’t find the answer that applies to you there, I recommend speaking with a tax professional.

What is IRS Form 5405?

The entire credit must be repaid on the return for the year in which the sale occurs or the use as a principal residence ceases. Beside indicating exceptions, Part II calculates the amount of the credit you still owe. You’ll enter the total credit claimed, repayments made, and your tentative remaining balance. This calculation factors in any gain from selling or disposing of your home to determine if you must continue repaying the credit on your 2023 taxes.

Form 5405 explained: How (and when) to repay the first-time homebuyer credit

Form 5405 Part I covers the date you stopped using the home as your primary residence and any qualifying reasons for discontinuing repayments. You’ll indicate if you moved due to government orders or converted the home to rental or business use. This section helps determine exceptions to repayment and whether you need to complete other parts of the form.

If married, the spouse must also have been a U.S. citizen or resident alien for the entire tax year. For information about nonresidents or dual-status aliens, please see International taxpayers. Before accessing the tool, please read through these questions and answers to determine the requirements for repaying the credit.

File

To manage repayment, determine if you are required to repay the 2008 Homebuyer Credit. However, if the property is no longer your primary residence, the remaining balance becomes due. This includes selling the home, converting it to a rental, or if it’s destroyed or condemned. For example, selling to an unrelated party limits repayment to the gain on the sale, meaning no repayment is needed if sold at a loss.

If you purchased your first home between April 9, 2008, and December 31, 2008, and received the First-Time Homebuyer Credit, you're generally required to repay it over 15 years. Ownership of a vacation home or a rental property does not disqualify you as a first-time buyer in the eyes of the program. If you bought your first home in 2009, you qualify for up to an $8,000 tax credit, which does not need to be repaid, except in certain circumstances (see below). In addition to basic entries, Part II guides you through how much of the credit remains after prior payments and how your gain from the home’s sale affects repayment. Following the IRS instructions precisely ensures your repayment amount is accurate, protecting you from underpayment or unnecessary repayment.

Long-term residents were defined as those who owned and lived in their residences for at least five consecutive years in the eight-year period that ended on the purchase date of the new property. Armed Forces remained eligible for the credit through April 30, 2011. Those serving in the U.S. military, the intelligence community, or Foreign Service on official extended duty outside the U.S. had an additional year to qualify for the homebuyer credit. The following TurboTax Online offers may be available for tax year 2024. Intuit reserves the right to modify or terminate any offer at any time for any reason in its sole discretion.

See Form 5405 for the full calculation (use the most recent version of the form if you bought a home in 2009; earlier versions did not include the 2009 tax credit). You are considered a first-time home buyer if you (and your spouse, if you are married) didn't own a primary residence in the past three years. From above, you use IRS Form 5405 to manage repayment or exceptions related to the 2008 First-Time Homebuyer Credit. If you sold, disposed of, or your home was condemned, you may need to file this form with your current tax return to calculate the repayment accurately. If none of these situations apply and you’re simply making annual installment payments, you do not need to file Form 5405.